Current account (Balance of payments)

The Current Account report is a quarterly report released by the US Bureau of Economic Analysis, a unit within the US Department of Commerce. The report is also called the International Transactions report or the Balance of Payments report. The report measures the difference in value between goods imported into, and exported from a country, as well as services, income flows, and unilateral transfers during the previous quarter under review.

The balance of the current account indicates if a country is running a deficit or a surplus. The components that are examined in the current account are: goods, services, income and current transfers.

Usually the goods and services portion of the report is of no market impact because it is simply a duplicate of the Trade Balance report released monthly.

Time of Release

The US Current Account report is usually released every three months (Dec, March, June, September), at about the middle of the month. The time of release is 9.30am US Eastern Time. The data is released on this webpage of the US Bureau of Economic Analysis and also on independent news feeds from Bloomberg and Thomas Reuters.

This news release is also available on the web site of the BEA along with highlights of this news release, a description of the estimation methods used to compile them and the latest statistics for U.S. international transactions.

Interpreting the Data

The Balance of Payments report is of moderate market impact. Usually its release coincides with the Core CPI report for the month, so it is usually better to focus more on what the higher impact news releases are saying if the trader is interests in a direct and immediate trade. The current account is usually linked directly to currency demand. Where there is a rising trade surplus, this is an indication that outsiders are buying more of the local currency so as to perform transactions in the country. This is seen as USD positive.

Where there is a widening trade deficit, then the reverse is the case and this is seen as USD negative.

Conclusion

The trade is not usually considered on the basis of whether the actual reading is higher or lower than the expected, but usually on what the surplus or deficit indicates for the country in focus. Deficits are not always a bad thing, if the money borrowed from other sources is used to make investments in key areas of the economy (as opposed to being lost via corruption).

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